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Manufacturers Moving to Mexico

Politics Posted by glen 6 months, 1 week ago

So, I thought we could dip our toe into politics here in the Parlor fairly easily with this post.

I've been following this story about Ford moving to Mexico to make new cars. They've done a fairly smart thing by not killing any current jobs, but making only new cars (and jobs) across the border.

I'm torn on this. On one hand, the current laws allow them to do this, and their public company exists to make the most amount of profit for their shareholders. (I'm assuming their move strategically aligns with cutting development costs.)

On the other hand... it feels a bit wrong to me. And to Donald Trump who wants to impose a 35% tax to Ford for doing this. Presumably Trump was shooting from the hip on this, but this is a valid point:

Should we tax companies who develop overseas and then turn around and "import" back into the country to sell?

13 replies

  • Chet_Manly

    You're not alone in your sentiments. It's a topic with a strong duality and I see some validity on both sides as well.

    I would merely suggest that it would be helpful if we could also have an honest discussion (nationally, because it is very possible to do here) about the causes of rising costs domestically. What factors are in place that are causing costs to increase and have caused them to rise in the past.

    Without addressing the causes of manufacturing prices rising, I feel The issues isn't being fairly presented. I, however, am not going to start that conversation; just suggest it should take place.

    Reply

    • glen

      I'd add that the issue (right now) is even further complicated and messy because of the political he said/she said that is playing out.

      But I'd agree, rising costs are the heart of the issue. If a car can be made for the same price than it can in Mexico, than Ford (or any other company) doesn't look elsewhere for production. We fix that (or at least acknowledge it), and it goes a long way to fixing the problem.

      Reply

  • Razorback

    Americans have to start thinking differently. We now live in a global economy. To compete, you have to utilize resources from around the world. It is no longer an us vs. them mentality. The most successful companies outsource if/when needed to be competitive. Americans may not like it, but the Internet has opened up the world in terms of commerce and economics.

    Labor costs are one of the primary causes of outsourcing in the auto industry. According to the Center for Automotive Research, the average hourly labor cost (pay plus benefits) is $58 at GM, $57 at Ford and $48 at Fiat Chrysler. That is roughly $100K per year to build cars. While I believe people should be compensated fairly, that is ridiculous. Add pensions on top of that and it just becomes insane. We are pricing ourselves out of jobs because we are greedy.

    That being said, another issue is that we are not preparing people to enter the manufacturing industry. Everybody talks about going to college but we need people to fill the important blue collar jobs as well. Schools continue to remove vocational and liberal arts programs from their curriculum. Mike Rowe does the best job of explaining this disparity and America's need for skilled trade workers.

    Lastly, Americans are lazy. There are plenty of people living on government assistance that are perfectly capable of working. But they don't and this creates an additional shortage of labor.

    We are doing this to ourselves.

    Reply

    • glen

      Americans have to start thinking differently. We now live in a global economy. To compete, you have to utilize resources from around the world. It is no longer an us vs. them mentality. The most successful companies outsource if/when needed to be competitive. Americans may not like it, but the Internet has opened up the world in terms of commerce and economics.

      I couldn't agree more. We can't enjoy all of the benefits of the Internet (lower cost goods, more options, etc.) without accepting that there is going to be a tradeoff somewhere.

      On the more positive side: I think if utilized correctly the globalization of the Internet has opened new possibilities for companies to find global customers, so the overall economy of the country can benefit from it.

      But overall, I think you're right: the rules have changed, and we need to change to keep up.

      Reply

    • Filadog

      Those hourly wages are insane. I did not know that. Those wages are comparable to what a mid-level provider with a Master's in Medical Science makes in the ER.

      Reply

  • Chet_Manly

    All very valid points mentioned. I also feel like our monetary policy that shapes inflation and other factors that contribute, like minimum wage hikes, have a hand in production/labor costs increasing.

    I don't know how strongly these forces act upon "overseas" job losses, but I would love to hear about it from a serious and nonpartisan (as much as a person can be unbiased politically) economist.

    I'm sure Thomas Sowell has written about it but I would have to go searching for it. Some might argue he has a bias (and he certainly doesn't have a progressive bias, but a lack of one particular bias isn't proof of another's existance) but I feel he Is intellectually honest.

    Reply

  • Filadog

    I would like to know how big of a role the unions played in this. My father worked for Carrier when they moved their plant to Mexico. For years, the union kept demanding more and more. They eventually made it an easy decision for the company to move somewhere that the employees would work for less and actually appreciate the opportunity to have a job.

    Reply

    • Chet_Manly

      Yes, that sounds exactly right. I also have a relative who works for Carrier and I was amazed at the package provided by the company, yet I never heard anything about that package in the news. The Carrier situation was what has prompted me to think more deeply about root causes of the situation.

      Reply

    • Razorback

      I feel certain they play a large part. It's a touchy subject. I think unions serve a valuable purpose in some professions but in others, it is time for them to go away.

      Reply

      • Filadog

        Agreed. There is no question unions have been useful in helping create a safer work environment with reasonable compensation, but they have grown too large and need to be scaled way back.

        Reply